COVID-19: LeasePlan scraps dividends and investments
Last year proved a mixed bag of results for LeasePlan, which released its fourth-quarter and full-year results. In Q4, the company’s net result was up 62.7% (to €115 million), but for the whole of 2019, it was down 4.9% (to €403 million). The company also announced measures to mitigate the worst effects of the Coronavirus crisis.
“Today, we find ourselves in unprecedented times, with the Covid-19 health crisis causing significant disruption in the global economy," said CEO Tex Gunning. "At LeasePlan, we have already taken swift action to ensure the safety of our employees, minimise the impact on our business and our customers, and adjust to the new economic reality. While we are in a strong position as a result of the fundamental strength and resilience of our business, we have taken the prudent decision to defer non-urgent investments and pay no further dividends on our 2019 net results. In short, we have taken decisive steps to ensure that LeasePlan has maximum room for manoeuvre in the coming months and will emerge strongly from the crisis when it passes.”
Back to the annual report. LeasePlan profiles itself as a company with two main business streams: CaaS, short for Car-as-a-Service, which comprises leasing and all other forms of innovative mobility offerings; and used-car remarketing, via its subsidiary CarNext.com (pictured).
The former is doing well. LeasePlan’s serviced fleet grew by 2.4% last year, to 1.86 million, up from 1.82 million at the end of the previous year. 1,4 million vehicles out of the 1,9 million are funded, 89% of the fleet is operating in Europe and the average CO2-emission per vehicle is 133g/km, knowing that LeasePlan has taken the commitment to have a zero-emission, electrified fleet by 2030. In 2019 7.4% of LeasePlan's new vehicle orders were EVs. This resulted in a full-year gross profit for leasing and additional services up 3.3% to €1,538 million – thanks not just to fleet growth itself, but also to strong growth in Damage Services and Insurance.
However, a solid CaaS performance and cost discipline didn’t outweigh the continued increase in operational expenses related to the strategic investment in CarNext.com – hence the negative net result (the full-year underlying net result was -3.4% to €557m; for Q4 it was +17.2% to €126m).
The underlying return on equity dropped from 17.3% in 2018 to 15.2% in 2019 (14.6%, including the Additional Tier 1 instrument).
Thanks to LeasePlan’s careful (if costly) cultivation, CarNext.com’s growth is accelerating. Full-year B2C results were up 31% to 65,300 units; Q4 growth was faster, at 36%, to around 18,600 vehicles – at 28.5%, significantly more than a quarter of annual total sales. Sales to retail were up 50%, both for Q4 and for the full year.
Will LeasePlan’s continued investment in CarNext.com pay off? While that remains to be seen, it is notable that Arval and ALD – two other major lease companies that also just released their annual reports – posted significantly higher fleet growth figures for 2019.
- Arval outperformed the market and grew its leased fleet by 9.1% to 1.3 million.
- ALD’s total fleet was up 7% in 2019, to 1.76 million.
Of course, LeasePlan’s total fleet remains (somewhat) bigger.
Focusing on the ‘solid’ underlying net result of €557m for the whole year, LeasePlan CEO Tex Gunning said the results are “a proofpoint of our strategy to position our business for the shift from car ownership to car subscription services, and will ensure we are well placed to benefit from the accelerated growth in the market in the years ahead.” LeasePlan’s strategy is to become the world’s first fully digital Car-as-a-Service business. Its digital approach needs to enable the company to enter new market segments, delivering digital services at digital cost levels, and ensure it can fully capitalise on its global scale.
Mr Gunning also lauded
- strong growth in the SME segment, thanks in part to the rollout of the fully online SME showroom in eight countries;
- strong growth in Insurance, which saw sales penetration increase to nearly half of LeasePlan’s serviced fleet;
- LeasePlan’s efforts to drive the transition to EVs, with the launch of its Green Bond (amid other measures);
- and last but not least, CarNext.com, “now available in 23 countries with 45 delivery stores (…) Volumes are up, as its trusted network of third-party suppliers grew substantially over the year.”